Which law requires mortgage lenders to provide good faith estimates of closing costs?

Which law requires mortgage lenders to provide good faith estimates of closing costs?

• A. Truth in Lending Act
• B. RESPA
• C. Equal Credit Opportunity Act
• D. Home Mortgage Disclosure Act

Answer: (B)

The law that requires mortgage lenders to provide good faith estimates of closing costs is the Real Estate Settlement Procedures Act (RESPA). This federal statute was enacted to enhance transparency in the real estate transaction process, particularly related to the costs associated with mortgage loans and closing. RESPA mandates that lenders provide borrowers with a Good Faith Estimate (GFE) of the closing costs within three days of receiving a loan application. This estimate outlines the expected fees and charges that the borrower may face at closing, helping to ensure that borrowers can make informed decisions about their mortgage options. By requiring this disclosure, RESPA aims to protect consumers from being surprised by hidden costs at closing, allowing them to compare different offers from lenders more effectively. In contrast, the Truth in Lending Act focuses more on disclosing the terms and costs of borrowing, such as the annual percentage rate (APR), rather than specifically addressing closing costs. The Equal Credit Opportunity Act aims to prevent discrimination in lending practices, and the Home Mortgage Disclosure Act requires lenders to report certain demographic information about their lending activities, rather than providing estimates of closing costs.

The law that requires mortgage lenders to provide good faith estimates of closing costs is the Real Estate Settlement Procedures Act (RESPA). This federal statute was enacted to enhance transparency in the real estate transaction process, particularly related to the costs associated with mortgage loans and closing.

RESPA mandates that lenders provide borrowers with a Good Faith Estimate (GFE) of the closing costs within three days of receiving a loan application. This estimate outlines the expected fees and charges that the borrower may face at closing, helping to ensure that borrowers can make informed decisions about their mortgage options. By requiring this disclosure, RESPA aims to protect consumers from being surprised by hidden costs at closing, allowing them to compare different offers from lenders more effectively.

In contrast, the Truth in Lending Act focuses more on disclosing the terms and costs of borrowing, such as the annual percentage rate (APR), rather than specifically addressing closing costs. The Equal Credit Opportunity Act aims to prevent discrimination in lending practices, and the Home Mortgage Disclosure Act requires lenders to report certain demographic information about their lending activities, rather than providing estimates of closing costs.